This is an artist's rendering of the proposed $26.8 million Marriott Hotel in Syracuse. The 180-room hotel would replace a 150-space parking lot across from Kitty Hoynes Irish Pub and Restaurant.

Syracuse, NY - Bad news for a development project in Franklin Square is good news for a 180-room, seven-story hotel planned for Armory Square.

Empire State Development Corp., the state’s economic development arm, agreed on Dec. 16 to pull $500,000 from a $2 million grant slated for an office and residential building project in Franklin Square and give it instead to the Armory Square hotel project. The grant for the hotel project will be in addition to a $2 million loan the project is already scheduled to receive from the state.

Richard H. Sykes Jr., of RHS Holdings LLC, the developer of the Armory Square project, said Monday he expects to begin construction on the hotel in the spring and complete it during the summer of 2012.

The project actually consists of two hotels at the northwest corner of South Franklin and West Fayette streets, just south of the recently completed Washington Station office building that is the new home of the O’Brien & Gere engineering company. A 102-room Marriott Courtyard hotel and a 78-room Marriott Residence Inn, designed for extended stays, are planned for the site, which is currently a parking lot.

The estimated cost of the project has previously been reported as $31 million, but the state put the current figure at $26.77 million. The developer will invest $7.27 million, the state said.

The project will result in 200 construction jobs and about 100 full- and part-time permanent jobs, the state said.

Losing out is developer Douglas Sutherland’s proposed mixed-use building on the site of the former Tompkins Fabric building 438 N. Franklin St., on the northeast corner of North Franklin Street and Genant Drive.

Ben Walsh, deputy commissioner of the city Office of Neighborhood & Business Development, said the agency asked the state to redirect $500,000 from the Franklin Square project to the Armory Square hotel. The Franklin Square project will remain eligible for $1.5 million in state aid, though it faces a state deadline in March to get off the ground, he said.

Walsh said the switch was made because the reduced size of the Franklin Square project lowered its cost and the agency “didn’t feel that the project was in a position to move forward anytime soon.”

“I don’t think it’s dead,” Walsh said of the Franklin Square project. “It’s just not going forward at the same rate that the hotel project is.”